Risk Squeezed from Credit Card Business Post-Recession: Report

It's long been understood that the credit card industry became a less risky business in the wake of large recession-era losses.

Now the magnitude of that shift toward more conservative lending is becoming clearer.

A new report from the American Bankers Association finds that today's card holders have significantly higher credit scores than card holders had several years ago and are substantially more likely to pay off their full balances each month.

The percentage of customers who regularly pay off the entire amount they owe stood at 28.7% in the second quarter of this year, up from 19.6% in the first quarter of 2008, according to the report.

Meanwhile, the share of credit card borrowers whose credit scores fall into the highest band – a group known as super-prime customers – rose from 42% in 2009 to 51.7% in the second quarter of 2013.

During the same four-year period, the share of card users with subprime credit scores fell from 26.5% to 18.8%.

The entire U.S. population has not seen a similar improvement in their credit scores since 2009; in fact, the distribution of all consumers across the various credit bands is virtually unchanged, according to the report.

This suggests that a more creditworthy segment of the population is paying with plastic than was the case several years ago.

"We're still exploring the factors behind the dramatic shift to low-risk accounts in the face of an improvement economy and slowly easing credit standards," Kenneth Clayton, executive director of the ABA's Card Policy Council, said in a news release.

"Regulatory restrictions on banks' ability to manage risk, the unsecured nature of credit cards and the after-effects of the recession all play a role as banks navigate today's economic environment."

Other findings in the report further support the conclusion that the card issuers have significantly reduced their risk in the wake of the recession.

Average credit lines have gotten smaller, and credit card debt as a percentage of each customer's disposable income has shrunk substantially.

In addition, credit card debt now comprises just 4% of nominal U.S. gross domestic product – down from 6% five years ago.